Research Summary
Diving into Uniswap’s liquidity mining experiments on Optimism, the report re-examines the impact of incentives on Total Value Locked (TVL) and trading volume. Contrary to prior beliefs that programs didn’t retain liquidity once incentives ceased, it’s found that these incentives can indeed have a lasting effect on both TVL and volume. The study spans two experiment phases from 2022 and 2023, with a special focus on Phase 2 due to its minimal market stress influence. Results varied across pools, with some showing sustained impact and others calling for further analysis.
Actionable Insights
- Liquidity Mining Effectiveness: The report finds that liquidity mining can create a sustained lift in liquidity for some pools, challenging the previous conclusion that such programs were ineffective.
- Two Mechanisms Identified: Gauntlet identifies two mechanisms through which liquidity mining may result in long-term sustained lift: Forgetful Liquidity Providers and Liquidity → Volume Bootstrapping.
- Success in Specific Pools: Two out of five pools (wstETH/WETH .05% and OP/USDC 0.3%) experienced a statistically significant sustained lift in both TVL and volume.
- Need for Further Analysis: Three pools did not experience sustained impact, and further analysis is needed to determine the success or failure of liquidity mining for these pools.
- Encouraging Results: The 40% success rate in this experiment suggests potential for improving success rates with better targeting and further research.
